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Gold Declines, Ending Longest Rally in Six Months, on U.S. Data

March 13 (Bloomberg) -- Gold fell, ending the longest rally since August, as stronger data in the U.S. eased pressure on the Federal Reserve to expand its stimulus measures to boost growth.

U.S. retail sales rose 1.1 percent in February, the most in five months, the Commerce Department said today. The Federal Open Market Committee, which meets March 19-20, is debating how long to continue the $85 billion in monthly purchases of Treasuries and mortgage bonds. Gold prices have declined 5.2 percent this year, partly on concern that Fed may end its stimulus program. The dollar has gained 3.9 percent against a basket of currencies in 2013.

“The better-than-expected retail-sales report and the strength in the dollar are holding gold back,” Frank Lesh, a trader at FuturePath Trading in Chicago, said in a telephone interview. “There’s still fear out there in general, and people are also watching to see what the Fed will do when it meets.”

Gold futures for April delivery slipped 0.2 percent to settle at $1,588.40 an ounce at 1:44 p.m. on the Comex in New York. Prices rose in each of the previous four sessions, gaining 1.1 percent.

China should only invest 1 percent to 2 percent of its foreign exchange reserves in gold because the market is too small, Yi Gang, a deputy governor for the central bank, said today at a briefing in Beijing. While Chinese purchases may raise prices and hurt domestic consumers, bullion is always an option for China’s investments, Yi said. The metal accounts for about 1.8 percent of the nation’s reserves, World Gold Council data show.

Silver futures for May delivery dropped 0.7 percent to $28.958 an ounce on the Comex.

On the New York Mercantile Exchange, platinum futures for April delivery slid 0.1 percent to $1,593.10 an ounce.

Palladium futures for June delivery retreated 0.5 percent to $771.25 an ounce. Futures trading volume was 60 percent below the average in the past 100 days for this time of day.

To contact the reporters on this story: Joe Richter in New York at jrichter1@bloomberg.net; Debarati Roy in New York at droy5@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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